PSX surge

Pakistan Stock Exchange’s benchmark index has mostly been in decline since hitting an all-time high in May 2017

The KSE-100 index cleared 50,000 on Tuesday, the first time in six years that it has been above that level. And although it eventually settled below the symbolic mark, actually declining by 4% for the full day to close at 49,531 points, the midday spike is being seen as a positive by some investors. However, others are wary because much of the gain was driven by foreign investors — a fear also substantiated by a 100-point fall in index on Wednesday.

The Pakistan Stock Exchange’s benchmark index has mostly been in decline since hitting an all-time high of 53,103 in May 2017. PML-N supporters have been quick to connect the index’s decline to the removal of former PM Nawaz Sharif, who was in the middle of a losing battle in the Panama Papers case at the time — he was eventually convicted and removed from office in late July. The index declined for the rest of the PML-N’s term and most of the PTI term, eventually nosediving below 28,000 during the initial days of the Covid-19 lockdown. Since then, the index has slowly — and erratically — recovered, despite economic disarray in the country. While not directly related, it may be more than a coincidence that the exchange has recovered in the days leading up to Nawaz’s return to the country.

Among optimists, key focus was placed on the rupee’s recovery, reduction of petrol and diesel prices, and the prime minister’s tour of China, which is expected to bring new investment — or at least speed up work on some projects associated with CPEC. Stability on the current account front and compliance with IMF conditions were also regarded positively. However, there is concern that the new investment may be temporary — foreign investors are far more likely to withdraw if market conditions begin to look unfavourable. Meanwhile, some investors may be gaming the system, as the market appears to be outperforming the economy. However, if the interest rate does start coming down, as some have projected, it could encourage local investors to become more involved in the market, which would be more sustainable.

Published in The Express Tribune, October 19^th, 2023.

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